Entrepreneur says Nielsen doesn't rate

He says he has a better way to find out who's watching TV, and he wants a share of the market.

By ERIC DEGGANS
Published July 16, 2006

ST. PETERSBURG — He’s best known as a local entrepreneur backing an ambitious plan to add 740 new luxury condominium units to St. Petersburg’s skyline.

But Frank Maggio also aims to redefine TV from his office in St. Petersburg by taking on the industry’s 800-pound gorilla, Nielsen Media Research.

He’s got a gaming channel, dubbed ReacTV, set to debut Aug. 1 on the Internet and on Bright House Networks’ digital cable Channel 77. Key to his channel’s success, however, is a method for calculating second-by-second TV ratings developed by his Bradenton company, erinMedia.

Maggio, 44, a personable spark plug of a guy who made a fortune after figuring out the code behind a scratch-off contest, knows some TV industry types still don’t know what to make of him.

Does he have more ideas and money than common sense? Is he trying to con established players into helping him break off a piece of the industry’s multibillion-dollar ratings measurement business?

In other words: Is he for real?

“I thrive on being underestimated,” Maggio said. “This is like guerrilla warfare. … You can use the court system, use the patent system, and cut deals with their biggest customers. Nobody’s ever fought them this way.”

There may be no better time to challenge Nielsen.

The explosion of TV online means outlets must track viewing on Internet sites, digital downloads and even cellular telephones.

With advertisers more willing to spend money online, TV outlets need reliable, expansive viewership numbers. (Advertisers buy TV time based on data Nielsen provides about who is watching; a single ratings point can mean millions of dollars in advertising revenue.)

“Every station, every network, every channel’s audience is somewhat undercounted,” said Norman Hecht, a TV ratings analyst who led an effort to develop competition for Nielsen in the mid 1980s.

But Hecht’s effort to challenge Nielsen simply pushed the company to adopt “people meter” technology — in which a device installed inside a household’s TV transmits viewership data to the company’s sprawling processing center in Oldsmar.

This is how Nielsen has often countered competition — adopting its competitors’ ideas or partnering with them outright.

“I encourage (Maggio’s) entrepreneurship; I am skeptical about his prospects,” said Gale D. Metzger, a ratings consultant who spent about $50-million developing a new ratings system in the mid ’90s, only to find TV networks balked at spending more to finance his service while also paying Nielsen’s fees.

“Nielsen has the industry locked in with contracts, which are significantly staggered,” said Metzger, noting that long deals make it difficult for several networks to abandon their service simultaneously. “Not very many players are willing to go out there and support a second service — essentially doubling their costs.”

Indeed, TV networks have complained about Nielsen’s methods for many years, concerned about their system’s limitations and occasional anomalies.

For local TV ratings in many regions — including the Tampa Bay area, the nation’s 12th largest TV market — Nielsen receives information electronically each day on what shows were watched, combined with paper diaries issued four times a year during “sweeps” months to determine who was watching.

But Nielsen can’t measure viewing outside homes, in places such as offices, bars, health clubs, college dormitories and hotels.

Some experts complain that those who fill out diaries may wait several days to document their viewing by memory.

And Nielsen has always struggled to get young people and minority groups to participate.

Maggio’s system counts on collecting data from digital cable boxes, which can send information back to cable companies about what people are watching. He casts the conflict as a fairness issue: Everyone should count.

“If you were to ask 100 people to name the first thing that comes to mind to ensure the program they love to watch on TV survives … their first answer would be, to watch it,” he said. “Wrong. The only way you can influence what happens is to influence a Nielsen family. We think we’re counted, but we’re not.”

Nielsen declined to comment on Maggio’s plans or his criticism, citing the lawsuits he filed last year against the company.

“Our recent public statements speak for themselves,” Nielsen spokesman Gary Holmes said.Last month, the company announced a huge Anytime Anywhere measurement project that will track TV viewing outside the home, on digital video recorders such as TiVo, use of video-on-demand services and other areas.

Under this plan, the much-criticized paper diaries would be eliminated by 2011.

But this, critics say, is another Nielsen strategy: Promise lots of new innovations to mute the impact of potential competition.

“We are tired of hearing what you’re going to do — just shut up and do it already,” said Metzger. “They’ve always been coming up with less than they promised later than they promised. And until somebody puts up the money to develop another system, that’s how it’s going to stay.”

***

It looks like one of those electronic trivia games people play in bars. But Maggio is convinced his new gaming channel, ReacTV, encompasses the future of TV and the future of viewership measurement in one project.

eated in a plush screening room at his downtown St. Petersburg office, Maggio uses a computer to call up displays of questions planned for the service. The channel offers a colorful display with multiple-choice questions under subjects titled “School Daze,” “Time Capsule” and “Media Mix.”

Viewers can earn prizes for answering trivia questions correctly or for answering questions about the advertisements; Maggio plans to pay out prizes totaling 30 percent of the channel’s net advertising revenues.

This is the core of Maggio’s TV revolution: charging advertisers through second-by-second viewership figures on who is watching their commercials — data Nielsen cannot provide.

Enter erinMedia.

Bright House Networks spokesman Joe Durkin confirmed the company will provide erinMedia with the number of digital cable subscribers in the Tampa Bay area watching ReacTV, stripping away identifying subscriber information .

“Bright House Networks will never release an individual’s information,” Durkin said. “Just the number of viewers for his channel, nothing more. That’s not only our policy, but it’s also the law.”

Using Internet usage data provided by another of his companies, Jagged Peak, Maggio plans to provide advertisers with “fused” ratings combining TV viewership and Web site usage.

Eventually, he hopes to persuade cable companies nationwide to provide erinMedia with similar cable box data to generate ratings for other communities.

“I bought erinMedia because of ReacTV. … If it never becomes anything more than the truthful ratings arm of ReacTV, I’ll be happy,” said Maggio. “But I’m convinced there will be no Nielsen in five years. There’s no way it can or should survive the onslaught of the truth.”

Already, Maggio’s erinMedia has filed two lawsuits against Nielsen, alleging the company has illegally built a monopoly and that its advertising exaggerates the system’s accuracy.

It’s a tactic that worked for the Rhode Island native back in 1985, when he broke the code to a scratch-off game sponsored by Beatrice Companies.

After Beatrice prematurely ended the game without paying, he filed a multimillion-dollar breach of contract suit — settling for enough money to retire at age 25 and move to St. Petersburg.

“I’m not asking for anyone to give me anything. … I just want a chance to compete,” Maggio said. “In school, I was never the biggest or the strongest, but I was among the smartest. And brains count in this fight.”

But others note Maggio’s plan has its weak spots. Some experts aren’t sure he can extrapolate who is watching a given TV show the way he proposes. They wonder how he calculates what people who don’t have cable are watching.

And they wonder if the cable industry will provide the one thing Maggio needs most: regular, comprehensive data collected from digital cable tuners from across the nation.

“Everybody seems to realize that this data is the key in a lot of ways to the future of audience measurement,” said Tim Brooks, senior vice president of research for the Lifetime cable channel in New York. “For the first time, you’ll have an actual census of what people are watching.”

Brooks suggested one reason the TV industry has generally encouraged Maggio is because, even if he doesn’t succeed, the competition may make Nielsen more customer friendly.

“We’re now seeing (in Nielsen’s recent announcements) … they’re laying out a plan with lots of specifics and timetables … which Nielsen traditionally has never done,” Brooks said.

Maggio remains energized by the idea that ground zero for the fight to redefine TV ratings is located right in the Tampa Bay area.

“Do you realize what a perfect storm is brewing in our back yard?” he said.

“It’s empowering consumers to be a part of TV culture. For Tampa Bay to be the battleground for democratizing television … that’s exciting.”

Eric Deggans can be reached at deggans@sptimes.com or (727) 893-8521. See his blog at www.sptimes.com/blogs/media.